US senators wrestle with Fed bank oversight issues

* Fed could retain large bank holding company oversight

* Details of Fed supervision role still undefined

By Kevin Drawbaugh and Rachelle Younglai

WASHINGTON, March 8 (BestGrowthStock) – The Federal Reserve could
retain oversight of large bank holding companies under a
scaled-back regulatory reform plan being considered by key
senators, but important questions remained unanswered,
lobbyists said on Sunday.

In a retreat from a bold proposal to streamline a patchwork
bank regulatory system, lawmakers were considering keeping
supervision of companies such as Citigroup (C.N: ) and Bank of
America (BAC.N: ) at the Fed, as Reuters reported in February.

It was still unclear, lobbyists said, if the Fed under the
evolving plan would be an “umbrella supervisor,” continuing to
rely on other agencies for detailed bank exams, and how many
companies might be put under the Fed.

One option, they said, was to assign holding companies with
assets of $100 billion and up to the Fed, which would include
nearly two dozen major firms.

Other, more expansive options were also being considered,
with Senate Banking Committee Chairman Christopher Dodd
expected to unveil legislation as soon as this week after
months of negotiations with fellow Democrats and Republicans.

(For a Factbox on the keys to financial regulation reform
in the U.S. Senate, double-click on [ID:nN05256609])

Regulatory reform is a top domestic priority of President
Barack Obama, who wants to crack down on banks and capital
markets following the worst financial crisis in decades.

Dodd in November called the Fed’s past performance as a
banking supervisor and consumer protection watchdog an “abysmal
failure.” When he made that remark, he proposed consolidating
bank supervision into a super-cop for the industry to be called
the Financial Institutions Regulatory Administration, or FIRA.

(For a Factbox on key players in reshaping U.S. financial
rules, double-click on [ID:nN02168734])

But the FIRA proposal has unraveled as Dodd has discussed a
range of compromises with Republicans and moved closer to
embracing regulatory reforms watered down from a sweeping bill
approved in December by the U.S. House of Representatives.

(For a Factbox on how U.S. banking regulation is structured
today, please double-click on [ID:nN26145675])

The FIRA would have streamlined the bank oversight duties
of the Fed, the Comptroller of the Currency, the Federal
Deposit Insurance Corp and other agencies.

The Fed in recent weeks has pushed hard to preserve its
role as a supervisor. Senators are discussing doing that up to
a point, but stripping the Fed of its job as supervisor of a
large number of state-chartered banks.

Dodd was said to be leaning toward reassigning those banks
to the FDIC, which already examines many other state-chartered
banks not in the Fed system, lobbyists said,

Dodd also plans to call for closing the Office of Thrift
Supervision, which regulates thrift institutions.

On Friday, Dodd said he was uncertain whether bipartisan
support for a compromise reform bill could be achieved.
(Editing by Peter Cooney)
(For a Scenarios on how the U.S. financial regulation fight
might play out, double-click on [ID:nN04129297])

US senators wrestle with Fed bank oversight issues